SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDIAN GAAP AND IFRS

The financial statements of the Issuer included in this Offering Circular have been prepared in
accordance with the accounting policies followed by the Issuer which conform to Indian GAAP as
applicable to the Issuer. The following is a general summary of certain principal differences between
Indian GAAP and IFRS as applicable to the Issuer. The differences identified below are limited to those
significant differences that are appropriate to the Issuer’s financial statements. However, they should not
be construed as being exhaustive, and no attempt has been made to identify possible future differences
between Indian GAAP and IFRS as a result of prescribed changes in accounting standards nor to identify
future differences that may affect the Issuer’s financial statements as a result of transactions or events that
may occur in the future.
IFRS INDIAN GAAP

1. Contents of financial A complete set of financial A complete set of financial

statements – General statements comprises a balance
sheet, income statement, cash flow
statement, statement showing
changes in equity and other
comprehensive income as at and
for the last two fiscal years,
accounting policies and other
explanatory notes to financial
statements with corresponding
figures from the previous year.
statements normally includes a
balance sheet, profit and loss
account and cash flow statement as
at and for the last fiscal year,
accounting policies and notes to
financial statements with one year
comparative. The presentation of
these financial statements differs
in certain respects compared to
IFRS.

Listed entities are required to

produce consolidated financial
statements and the related notes
along with standalone financial
statements.

2. Contents of financial No particular format is prescribed The Companies Act prescribes the
statements – for the income statement. balance sheet format and the
Disclosures However, an analysis of expenses prescribed format for the profit
must be presented in one of two and loss account. In the case of
formats (function or nature). banks, the format of the balance
Certain items must be presented on sheet and profit and loss account is
the face of the income statement. prescribed in Schedule 3 to the
Similarly, no particular format is Banking Regulations Act. Further,
prescribed for the balance sheet; the RBI prescribes various
an entity may use a liquidity disclosures from time to time.
presentation of assets and
liabilities, instead of a
current/non-current presentation,
only when a liquidity presentation
provides more relevant and
reliable information. Certain items
must be presented on the face of
the balance sheet. However, banks
shall present an income statement
which, groups income and
expenses by nature and disclose
the amounts of principal types of
income and expenses. Further,
banks shall present a balance sheet
that groups assets and liabilities by
nature and lists them in order that
reflects their relative liquidity.

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 IFRS INDIAN GAAP

3. Correction of errors – Mandatory restatement of Restatement is not required. The

comparative amounts comparative amounts for the prior nature and amount of prior period
for the prior year year period(s) presented in which items should be separately
period(s) presented in errors have occurred. disclosed in the current year ‘s
which errors have profit and loss and the effect of the
occurred error must also be disclosed.
Securities and Exchange Board of
India (SEBI) may, in the case of
publicly listed companies, take
necessary action as it deems fit,
including mandating restatement
of books of accounts on the
scrutiny of audit reports that
qualify the accounts of a company.

4. Changes in accounting Any change in accounting policy is Impact of and adjustments

policies required to be applied resulting from the change in
retrospectively requiring entities accounting policies are required to
to adjust each affected component be shown in the income statement
of equity for the earliest period of the period in which the change
presented, except where is made, except as specified in the
impracticable to do so. transition provisions of certain
standards where the changes
resulting from adoption of such
standards have to be shown by an
adjustment in the opening retained
earnings.

5. Statement of recognised The total of gains and losses There is no concept of

gains and losses recognised in a period is comprehensive income. However,
comprised of net income together accounting standards, statute and
with the following gains and losses industry practices allow for certain
which are recognised directly in adjustments in reserves. The RBI
equity: specifically requires gain on sale
of held-to-maturity securities to be
• revaluation increase/ appropriated from the profit/loss
decrease; account to capital reserve.
Revaluation gains on fixed assets
• fair value gains/(losses) on are directly shown as part of
land and reserves whereas revaluation
buildings, losses, if any, are charged to
available-for-sale, revenue.
investments and
certain financial
instruments;
• foreign exchange translation
differences;
• the cumulative effect of
changes in accounting
policy;
• changes in fair values of
certain financial instruments
if designated as cash flow
hedges, net of tax, and cash
flow hedges reclassified to
income and/or the
relevant hedged
asset/liability;
• equity dividend; and
• dividend of subsidiary
(minority interest).
Recognised gains and losses can
be presented either in the notes to
financial statements or highlighted
separately within the primary
statement of changes in
shareholders’ equity.

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 IFRS
6. Statement of changes in The statement must be presented
shareholder ‘s equity as a primary statement. The
statement must show capital
transactions with owners, the
movement in accumulated profit
and a reconciliation of all other
components of equity.
7. Consolidation of The consolidated financial
subsidiaries statements include all subsidiaries
and foreign/domestic branches of
the parent. IFRS focuses on the
concept of the power to control in
determining whether a parent-
subsidiary relationship exists. An
investor, regardless of the nature
of its involvement with the
investee, is required to determine
whether it is a parent by assessing
whether it controls the investee.
An investor controls an investee if
and only if the investor has all the
following:
(a) power over the investee;
(b) exposure, or rights, to
variable returns from its
involvement with the
investee; and
(c) the ability to use its power
over the investee to affect
the amount of the
investor’s return.
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INDIAN GAAP
No separate statement required.
However, any adjustments to
equity and reserve account must be
shown in the schedules that
accompany the financial
statements.
Consolidation is required only in
the case of listed companies and
when there is controlling interest,
directly or indirectly through
subsidiaries, by virtue of holding
the majority of the voting shares of
an enterprise or controlling the
board of directors of an enterprise
except in case of entities such as
gratuity trust where the objective
is not to obtain economic benefits
from their activities. A subsidiary
should be excluded from
consolidation when:
• control is intended to be
temporary because the
subsidiary is acquired and
held exclusively with a view
to its subsequent disposal in
the near future; or
• it operates under severe
long-term restrictions that
significantly impair its
ability to transfer funds to
the parent.
The reasons for not consolidating a
subsidiary should be disclosed in
the consolidated financial
statements. In separate financial
statements of banks, investments
in such subsidiaries should be
accounted for in accordance with
guidelines prescribed by the RBI.
As per the RBI guidelines, such
investments are required to be
accounted at costs less any
permanent diminution in the value
of such investments.
 IFRS INDIAN GAAP

8. Consolidation of Consolidated financial statements Similar to IFRS. However, if it is

subsidiaries – are prepared using uniform not practical to use uniform
Uniform accounting accounting policies for all the accounting policies, that fact
policies entities in a group. should be disclosed together with
the proportions of the items to
which different accounting
policies have been applied.

9. Consolidation of The consolidated financial Similar to IFRS. However, the

subsidiaries – statements of the parent and the difference between the reporting
Reporting period subsidiary are usually drawn up at dates should not be more than six
the same reporting date. However, months.
the consolidation of subsidiary
accounts can be drawn up at a
different reporting date provided
that the difference between the
reporting dates is no more than
three months. Adjustments are
made for significant transactions
that occur in the gap period.

10. Accounting for jointly IFRS 12 – Joint Arrangements, Accounting for jointly controlled
controlled entities which became effective from entities is required to be done
January 2013, requires joint using proportionate consolidation
arrangements to be classified method, except when an interest in
either as a joint operation or a joint a jointly controlled entity:
venture. A venturer shall account
for its interest in a jointly • is acquired and held
controlled operation using exclusively with a view to its
proportionate consolidation and in subsequent disposal in the
a joint venture using equity near future; and
method.
• operates under severe long-
term restrictions which
significantly impair its
ability to transfer funds to
the investor.

11. Jointly controlled The consolidated financial Similar to IFRS. However, the
entities – Reporting statements of the joint venturers difference between the reporting
period are usually drawn up at the same dates should not be more than six
reporting date. However, the months.
consolidation can be drawn up at a
different reporting date provided
the difference between the
reporting dates is no more than
three months. Adjustments are
made for significant transactions
that occur in the gap period.

12. Presentation of jointly In standalone financials, in In standalone financials,

controlled entities accordance with IAS 27 – Separate investment in joint venture is
(joint ventures) Financial Statements, investment carried at cost less impairment.
in joint ventures is carried at cost
or at fair value.

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 IFRS INDIAN GAAP

13. Presentation of associate Equity method must be used. Similar to IFRS. However, the
results Presentation must show share of accounting for associate results
post-tax results. using the equity method was not
required under Indian GAAP until
1 April 2003. Upon transition to
the equity method from the cost
method, an increase in Investment
in Associate in Shareholders’
Equity should be recorded as an
adjustment to reserves for the
period of change. The equity
method of accounting is not
required in the separate/standalone
financial statements of the
investor.

14. Employees Benefits – IAS 19 (amended in June 2011), Actuarial gain or loss should be
Recognition of which became effective from recognised immediately in profit
actuarial gains and January 2013, requires and loss account. The expected
losses remeasurements of the net defined return is estimated separately from
liability to be recognised in other the interest cost. Any difference
comprehensive income. between expected return and
actual return would form part of
actuarial gain/loss on assets and is
recognised in the profit and loss
account.

15. Depreciation Depreciation is allocated on a The Companies Act provides

systematic basis to each minimum rates of depreciation. If
accounting period over the managements’ estimate of useful
economic useful life of the asset life of a fixed asset is shorter than
reflecting the pattern in which the depreciation rates as per the
entity consumes the asset’s Companies Act, depreciation is
benefits. provided at a higher rate based on
the managements’ estimate of
Depreciation on revalued portion useful life.
cannot be recouped out of
revaluation reserve. Depreciation on revalued portion
can be recouped out of revaluation
reserve.

16. Component accounting As per IAS 16, it is mandatory to Indian GAAP allows but does not
for property, plant identify and depreciate separately mandate component accounting.
and equipment each material component of an
asset having a separate useful life.

17. Deferred expenditure Costs in respect of any start up are
expensed as incurred. Equity issue
costs should be accounted for as a
deduction from equity (net of any
related income tax benefit).
Costs are not allowed to be
deferred unless permitted by the
RBI.

18. Discounting of Discounting is required for Discounting of provisions is not

Provisions provisions if the effect is material. permitted.

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 IFRS
19. Provision for IAS 37 deals with ‘constructive
constructive obligation’ in the context of the
obligation creation of a provision. The effect
of recognising provision on the
basis of constructive obligation is
that, in some cases, provision will
be required to be recognised at an
early stage.
20. Initial recognition Financial assets are required to be
recognised at fair value on initial
recognition.
21. Financial Assets – Financial assets are to be classified
Classification as one of the following four
categories depending on certain
conditions to be satisfied for each
category:
• financial asset at fair value
through profit or loss;
• held-to-
maturity
investments;
• loans and receivables; and
• available-for-sale
financia
l assets.
22. Financial Assets – Initially, a financial asset is
Measurement measured at its fair value plus, in
the case of a financial asset not at
fair value through profit or loss,
transaction costs that are directly
attributable to the acquisition or
issue of the financial asset or
financial liability. Subsequent
measurement depends on the
classification of the investment –
if held-to-maturity investments
and loan receivables, carry at
amortised cost, using effective
interest method otherwise state at
fair value. Unrealised gains and
losses on fair value through profit
or loss classification (including
trading securities) are recognised
in the income statement.
Unrealised gains and losses on
available-for-sale investments are
recognised in equity.
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INDIAN GAAP
No provision is required to be
made for constructive obligation.
Upon initial recognition, financial
assets are recorded at its
transaction value.
AS 13, Accounting for
Investments is not applicable to
banks. The RBI has given
guidelines for classification of
investments into:
• held-to-
maturity;
• available-for-sale; and
• held-for-trading. Loans and
advances are classified on
the basis of the Income
Recognition and Asset
Classification norms of RBI.
Investments are measured and
valued on the basis of the
guidelines issued by the RBI from
time to time. Loans and advances
are measured in accordance with
the Income Recognition and Asset
Classification norms of the RBI.
Investments classified as
available-for-sale or held-for-
trading are measured at lower of
cost or market value and those
classified as held-to-maturity are
measured at weighted average
acquisition cost less the
amortisation of premium amount if
any, over the remaining period of
maturity.
 IFRS INDIAN GAAP

23. Financial liabilities – There are two categories of There are no classification
Classification financial liabilities: guidelines for financial liabilities.

• financial liabilities at
fair value through the profit
and loss account; and

• financial liabilities carried at

amortised cost.

24. Financial Liabilities – Initially, a financial liability is Liabilities are recognised based on
Measurement measured at its fair value plus, in the legal obligation of the entity.
the case of a financial liability not
at fair value through profit or loss,
transaction costs that are directly
attributable to the issue of the
financial liability. After initial
recognition, an entity shall
measure all financial liabilities at
amortised cost using the effective
interest method, except for:

• financial liabilities at
fair value through profit or
loss. Such liabilities,
including derivatives that
are liabilities, shall be
measured at fair value
except for a derivative
liability that is linked to
and must be settled by
delivery of an unquoted
equity instrument whose
fair value cannot be
reliably measured, which
shall be measured at cost;
and

• financial liabilities that arise

when a transfer of a financial
asset does not qualify for
derecognition or is accounted
for using the continuing
involvement
approach. Financial
liabilities that are
designated as hedged items
are subject to
measurement under the
hedge accounting
requirements.

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 IFRS
25. Financial Assets – For Fair Value Through Profit &
Reclassification Loss (FVTPL), reclassification
into and out of FVTPL on initial
recognition and reclassification of
derivatives is prohibited. Held for
trading may be reclassified into
AFS, HTM and L&R in certain
rare circumstances.
For HTM, if significant amount of
HTM is reclassified or sold, the
remaining investments in HTM
category are to be reclassified into
AFS and no investment can be
classified as HTM for a period of 2
years (also known as “tainting”).
For AFS, that would have met the
definition of loans and receivables
(if it had not been designated as
AFS) it may be transferred into
loans and receivables if the entity
has the intention and ability to
hold the financial asset for the
foreseeable future or until
maturity.
26. Discount on purchase of Discount on the purchase of held-
held-to-maturity to-maturity securities are required
securities to be adjusted in the effective
interest rate of the security and
recognised over the life of the
security.
27. Impairment of loans Impairment losses on loans and
receivables are recognised when
there is a loss event on the basis of
individual or collective
assessment. Impairment losses are
not allowed to be provided for
future expected losses.
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INDIAN GAAP
Where long-term investments are
reclassified as current investments,
transfers are made at the lower of
cost and carrying amount at the
date of transfer. Where
investments are reclassified from
current to long-term, transfers are
made at the lower of cost and fair
value at the date of transfer.
As per the RBI Guidelines, Banks
may reclassify investments into
and out of HTM once a year.
Banks may reclassify investments
from AFS to HFT.
Reclassification of investments
from HFT to AFS is allowed under
exceptional circumstances.
Transfer of investments from one
category to another, under all
circumstances, should be done at
the acquisition cost/book
value/market value on the date of
transfer, whichever is the least,
and the depreciation, if any, on
such transfer should be fully
provided for. Banks may apply the
values as on the date of transfer
and in the event that there are
practical difficulties in applying
the values as on the date of
transfer, banks have the option of
applying the values as on the
previous working day, for arriving
at the depreciation requirement on
the shifting of securities.
Based on RBI guidelines, discount
is not accreted. The same will be
recognised in the profit and loss
accounts at the time of sale of the
security.
Impairment on loans are
recognised based on RBI
guidelines. The guidelines
prescribe minimum losses to be
provided based on the number of
days past due of an asset. Losses
above the minimum prescribed
levels can be provided based on
management estimates.
 IFRS INDIAN GAAP

28. Hedge accounting IAS 39 recognises three types of
hedges, namely the fair value
hedge, cash flow hedge and net
investment hedge. Under the fair
value hedge, both the hedged
instrument and hedging instrument
are carried at fair value through
the profit and loss account. For the
cash flow hedge and net
investment hedge, the effective
portion of fair value movement of
the hedged instrument is
recognised in Other
Comprehensive Income
(OCI)
with ineffective portion recognised
in the profit and loss account. The
fair value movement recorded in
OCI is subsequently released to
the profit and loss account
concurrently with the earnings
recognition pattern of the hedged
item.
Accounting for interest rate hedges
using interest rate derivatives are
prescribed by the RBI. Hedge
accounting for foreign currency
risk using forward contracts on
recognised assets and liabilities is
prescribed under AS 11(Revised).
In case of interest rate hedges,
interest rate swaps are not fair
valued. The net interest accrued on
the swap is recognised in the profit
and loss account. In case of
forward contracts, the premium
paid on the forward contract is
amortised over the contract period.
The forward contracts are valued
using the closing exchange rate.

29. Revenue – Interest Interest income is Interest is recognised on a time

recognised proportion basis taking into
using the effective interest account the amount outstanding
method. and the rate applicable. However
the interest is recognised on
receipt basis for NPAs as per RBI
guidelines.

30. Reward points As per IFRIC 13, the transaction
fee on credit cards is required to be
deferred to the extent of fair value
of the awards estimated to be
claimed in the future periods.
In absence of any specific
guidance, the entire transaction fee
earned is recognised upfront.

31. Revenue – Financials Fees that are an integral part of the Financial service fee is recognised
service fees effective interest rate of the as revenue depending on whether
instrument, for example, loan the service has been provided
origination, arrangement fees and “once for all” or is on a continuing
direct selling agents fees, are basis.
deferred and recognised as an
adjustment to the effective interest Loan origination and arrangement
rate. However when financial fees are recognised as revenue
instruments are valued at fair when the loan has been originated.
value with changes in fair value
being recognised in profit and loss,
the fees are recognised as revenue
when the instrument is initially
recognised.

Fees earned as services are

provided are recognised as
services provided. For example
fees charged for servicing a loan is
recognised over the period of the
loan.

Fees that are earned on the

execution of a significant act are
recognised when such act is
completed. For example,
placement fees for arranging a
loan and an investor are
recognised when the loan has been
arranged.

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 IFRS INDIAN GAAP

32. Dividends paid Dividends are recorded as Dividends are recorded as

liabilities when declared. liabilities when proposed.

33. Deferred income taxes The balance sheet approach must
be used (with some exceptions),
under which deferred tax is
required to be created for all
temporary differences between the
tax base and the carrying value of
the assets and liabilities. Deferred
tax assets are recognised only if its
recovery is probable.
Further, deferred tax is required to
be recognised in the consolidated
financial statements for
undistributed profits earned from
the subsidiaries. Deferred tax is
also required to be recognised for
unrealised intercompany profits in
the consolidated financial
statements.
Deferred tax assets and liabilities
should be recognised for all timing
differences subject to
consideration of prudence in
respect of deferred tax assets.
Where an enterprise has
unabsorbed depreciation or carried
forward losses under tax laws,
deferred tax assets should be
recognised only to the extent that
there is virtual certainty supported
by convincing evidence that
sufficient future taxable income
will be available against which
such deferred tax assets can be
realised. Deferred tax assets are
reassessed at each balance sheet
date and are adjusted to reflect the
amount that is reasonably or
virtually certain to be realised.

Deferred tax is accounted using

the income statement approach,
which focuses on timing
differences.

No deferred tax is recognised for

undistributed profits earned from
the subsidiaries or on unrealised
profits from intergroup
transactions in the consolidated
financial statements.

34. Interim financial Not mandatory to prepare interim The recognition and measurement
reporting statements but must use standard if principles laid down in Accounting
prepared. Basis should be Standard 25 (AS 25 – Interim
consistent with the full-year Financial Reporting) are
statements and include mandatory for only listed
comparatives. Publicly traded companies.
companies are encouraged to
provide interim financial reports.

35. Guarantees Fair value of guarantee is Guarantees must be disclosed as a

recognised as liability at the contingent liability.
inception. Subsequently, guarantee
contracts are required to be carried
at their fair value.

36. Related party The definition of related party The definition of related party is
disclosures includes non-executive directors narrower. Key managerial persons
and the remuneration paid to such do not include non-executive
non-executive directors are directors.
required to be disclosed.

37. Employee stock options The grant date fair value of the There is an option to recognise the
option is recognised as the intrinsic value or the fair value of
employee cost over the vesting the option as employee cost over
period. the vesting period.

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 IFRS INDIAN GAAP

38. Business combinations Business combinations are Pooling of interest method is

required to be accounted using the allowed for amalgamations when
purchase method. Pooling of certain conditions are met.
interest method is prohibited.

39. Securitisation As per IAS 39, securitised loans Securitised loans are derecognised
can be derecognised from from the books of account if they
the books of account only meet the true sale criteria as per
if substantial risks and rewards the RBI guidelines.
have been transferred.
Where substantial risks and
rewards have neither been
transferred substantially nor
retained substantially, then the
entity should evaluate whether
control has over the asset
has been transferred.

40. Qualitative and IFRS 7 requires both qualitative The RBI guidelines require certain
quantitative and quantitative disclosures risk related information to be
disclosures of related related to risks. disclosed as part of Basel Pillar III
to risks disclosures. Such disclosures are
not part of audited financials
statements.

41. Segment reporting Operating segments are identified
based on the financial information
that is evaluated regularly by the
chief operating decision maker in
deciding how to allocate resources
and in assessing performance.
Indian GAAP requires an
enterprise to identify two sets of
segments (namely business and
geographical) based on the risks
and rewards approach, with the
enterprise’s system of internal
reporting to the key management
personnel. This serves as the
starting point for the identification
of reportable segments. Reporting
segments are identified based on
parameters such as revenue, net
income, assets, and liabilities as
prescribed in AS 17 – Segment
Reporting.

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